You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

July 10, 2015

Legal Changes Will Affect Rights and Obligations of Corporate Guarantors

Subscribe to Updates
Bangkok Post, Corporate Counsellor Column

Guarantors are subject to a number of important obligations under Thai law. A guarantor can be held jointly liable with a debtor, or worse, solely and entirely liable as a primary debtor. In addition, creditors often use their higher bargaining power to force guarantors to waive their rights as secondary debtors, meaning that certain fundamental rights, such as the requirement for creditors to first call on debtors, are no longer enforceable.

The main forms of security available under the Thai Civil and Commercial Code are:

  • mortgage;
  • pledge; and
  • guarantee (suretyship), corporate or personal.

Thailand, however, does not provide for many of the security rights, such as liens and charges, which are available in common law countries. Therefore, creditors often elect to use guarantees—both corporate and personal—instead of security interests. Consequently, guarantors are tremendously important to creditors and they are frequently called on.

Despite their popularity, guarantors are not afforded an adequate level of protection. The Supreme Court has ruled that an agreement which is contrary to a guarantee provision, such as an agreement that requires a guarantor to be liable as a joint debtor, is enforceable. An act is not void if it differs from a provision of any law, it said, as long as the law in question does not relate to public order or good morals under Section 151 of the Civil and Commercial Code.

Therefore, as guarantee laws do not relate to public order or good morals, exemptions are permitted. The result is that guarantors can be forced to sign agreements that are contrary to the general provisions of guarantee laws—provisions that are intended to protect guarantors’ rights as secondary debtors.

In a sign that things could change for guarantors, new amendments to the guarantee and mortgage provisions of the Civil and Commercial Code will soon come into effect. This includes the Civil and Commercial Code Amendment Act (No. 20) B.E. 2557 (Amendment No. 20), which became effective on Feb 11, 2015, and another recent draft amendment (New Amendment) approved by the National Legislative Assembly on May 14, which is currently pending publication in the Government Gazette.

Amendment No. 20 aims to provide greater protection of rights and fair treatment to guarantors who are not primary debtors. However, local lenders have expressed discontent with the amendment because it offers the same level of protection to individual and corporate guarantors. In response to the outcry, the New Amendment will change the provisions that relate to guarantors and mortgagors who are juristic persons, financial institutions, or in the business of providing guarantees for remuneration.

Some of the most significant changes introduced by both amendments relate to corporate guarantors. Under Amendment No. 20, Section 681/1 has been added to the Civil and Commercial Code, which provides that:

“Any agreement which specifies that a guarantor must be liable in the same manner as that of a joint debtor or in the capacity of a joint debtor shall be void.”

The New Amendment added a second paragraph to Section 681/1, as follows:

“The above provision is not applicable to a guarantor who is a juristic person and who has consented to be bound in the same manner as that of a joint debtor, or in the capacity of a joint debtor. In such case, a guarantor who is a juristic person shall have no rights as provided in Sections 688, 689, and 690.”

Under these provisions, guarantors who are juristic persons and who have consented to be bound as a joint debtor can still be held jointly liable with debtors. In such a case, they have no rights as secondary debtors to request and require lenders to demand and call on debts from debtors first. These are rights provided under Sections 688, 689, and 690 of the Code.

In conclusion, corporate guarantors can still be liable as joint or primary debtors. Furthermore, if you are a corporate guarantor and your company is regarded as foreign under the Foreign Business Act, the provision of a corporate guarantee to secure a parent or affiliated company’s debts would be deemed a service business, which is restricted under List 3 (21) of the Act. Therefore, you would need to obtain a Foreign Business License before entering into a guarantee agreement.

If lending and guarantee arrangements involve foreign lenders, then an approval in principle from the Bank of Thailand regarding foreign-exchange control regulations is also likely to be required.

Download Full Article
Related Professionals

Practices

Corporate/M&A

Location

RELATED INSIGHTS​ 

December 15, 2025
Thailand is taking steps to energize its startup scene by drafting the Startup Promotion Law. This draft law aims to remove obstacles, open new funding opportunities, and provide coordinated government support. The goal is to make it easier for Thailand-based startups to grow and compete on a global stage. Why Is This Law Needed? For many years, Thai startups have operated under traditional company law frameworks that were not designed with high-growth businesses or with fundraising opportunities in mind. Restrictions on issuing bonds, offering shares to outside investors, and repurchasing shares for employee incentive programs made it challenging for emerging companies to access capital and accelerate their growth. The draft Startup Promotion Act seeks to remove these obstacles and foster a more competitive, entrepreneur-friendly environment in Thailand. Who’s in Charge? Two main organizations will oversee the startup ecosystem: Startup Promotion Committee: This group, to be appointed by the National Science, Research, and Innovation Policy Council, will set national strategies, policies, and budget; design promotional campaign and incentives; and propose further legislative amendments to promote startups. National Innovation Agency (NIA): Under the draft act, the NIA will be the main contact for startups and will serve as the secretariat office of the Startup Promotion Committee, coordinating data, advising startups, maintaining the public registry, and providing funding and investment (grants, repayable grants, loans, and equity) under committee criteria and, where applicable, cabinet approval. What Startups Are Eligible for Benefits? To be officially recognized and access benefits, a company must: Be a private limited company less than 10 years old at the time of application. Existing companies that already exceed the 10-year threshold may still apply for startup statues within one year of the law’s enactment, as long as they otherwise still qualify for the new regime. Have average annual revenue not
Read More
December 4, 2025
Thailand has expanded the circumstances under which state agencies may bypass competitive bidding procedures to address urgent security challenges. On November 28, 2025, Thailand’s Ministry of Finance published the Ministerial Regulation Determining Cases of Procurement by Specific Method (No. 6) B.E. 2568 in the Royal Gazette, introducing a new pathway for procuring supplies and services needed to address cyber and military threats that may affect the stability of government agencies or the nation. For technology vendors, cybersecurity firms, and defense contractors, this regulatory change creates immediate opportunities to engage directly with government buyers facing urgent security challenges. New Fast-Track Category for Security Threats The regulation amends Thailand’s Public Procurement and Supplies Management Act B.E. 2560 (2017) to add a new category of procurement that qualifies for the “specific method”—a noncompetitive, direct selection process. Previously, agencies could use this expedited method only in limited circumstances, such as emergencies, cases with proprietary technology requirements, or national security operations. The new provision explicitly covers procurement of supplies related to preventing or resolving cyber or military threats that could impact the stability of a state agency or the country. This addition recognizes the urgent nature of modern security challenges, where competitive bidding timelines may leave agencies vulnerable during critical threat windows. State agencies dealing with active cyberattacks, preparing defensive measures against anticipated threats, or responding to military security concerns can now move directly to negotiate with qualified vendors rather than conducting lengthy public tender processes. Vendor Considerations Vendors offering cybersecurity solutions now have a regulatory avenue to work directly with government clients when stability concerns are present. These solutions include threat detection systems, anti-ransomware tools, incident response services, firewalls, and security consulting. Similarly, defense contractors providing military equipment or specialized security supplies can pursue direct engagement channels where traditional procurement methods would create
Read More
December 4, 2025
Thailand’s Department of Business Development (DBD), through its Office of Central Company and Partnership Registration, has released multiple draft orders for public consultation until December 12, 2025. These draft orders aim to strengthen the business registration process, with a focus on the requirements for establishing and amending the principal office address of a partnership or limited company, verification of authorized signatories, and measures to identify and prevent registrations involving persons linked to suspicious or high-risk activities. The draft orders’ proposed requirements are outlined below. Principal Office Verification The principal office address of a partnership or limited company, including house registration code, house number, full address details, and building name, must be fully aligned with the civil registry. The registrar will strictly verify this before accepting any registration or amendment. If the address used for registration is already registered for at least five other companies, the company must submit a consent letter from the person authorized to allow use of the principal office, along with supporting documents proving the right to use the address. Signatory Certification Compliance Duties Persons certifying directors’ signatures on registration forms are responsible for verifying their identities, maintaining up-to-date information, and complying with the requirements of the DBD’s Biz Regist digital registration system. Certain supporting documents proving the qualifications of certifying persons are also required, with some exceptions for specific professional roles. Identity and qualification verification must be renewed upon the completion of one year from the date of registration as a certifying person, or if the certification credentials expire before the one-year period ends, in accordance with the verification requirements. Verification of Suspicious Parties Any partner, shareholder, or director linked to a predicate offense will be required to meet with the registrar in person for further verification steps. For all parties related to a company
Read More
December 2, 2025
Investing in Mainland Southeast Asia is Tilleke & Gibbins’ essential guide for investors looking to do business in this vibrant region, whether it’s starting operations as a newly established entity or expanding into new territories or business models.
Read More